Additional £1.5bn trebles BUS funding following success of increased heat pump grant

Around a million families and hundreds of businesses will be helped to cut their energy use, backed by £6 billion, as part of the new approach to net zero that will save on costs for the public.  

Household heating constitutes almost a third of the UK's yearly CO2 emissions, equivalent to the combined emissions of all petrol and diesel cars. Positioned as the low-carbon future for home heating, heat pumps offer a promising solution. To quantify the potential impact, British Gas has developed a calculator. Users can receive a personalized estimate of the CO2 reduction achievable by transitioning from traditional heating systems to modern heat pumps. The tool further provides context by comparing these savings to emissions from typical sources like long-distance flights and carbon-absorbing trees.

Families will benefit from a range of options to heat their home for less and reduce emissions through energy efficiency measures, such as insulation for around 500,000 homes and hundreds of thousands more grants for heat pumps. 

Boost for BUS

The Prime Minister’s 50% increase in the heat pump grant to £7,500 has already led to a 57% increase in applications. After the success of this scheme, an additional £1.5 billion of funding will ensure more homes and businesses can make the transition to low carbon heating by installing heat pumps.

Government announces £6 billion energy efficiency support for families, business and industry.

Energy Secretary Claire Coutinho said: ”Cutting energy bills is my top priority. Today’s funding will help those who are most in need and keep around a million more families warm during winter. 

“Everyone deserves to live in a warm, energy efficient home. We have already made excellent progress with nearly 50% of properties in England now having an Energy Performance Certificate of C – up from just 14% in 2010.

“This funding will help us go even further and improve 200,000 cold, low income and social homes.”

Removing the financial burden

Chancellor of the Exchequer Jeremy Hunt said: “Investing in energy efficiency combined with energy security, is the only way to stop ourselves being at the mercy of international gas prices, one of the main drivers of inflation. 

“This investment will support households and businesses across the country to make greener choices in a way that doesn’t add a burden to working people.”

The huge cash boost comes on top of the £6.6 billion capital funding already committed from 2022 to 2025. It will provide extra help for up to 200,000 families who need it most, such as those in poorly insulated, low income or social homes.  

This is a significant step in the government’s commitment to help keep energy costs down for families and businesses across the UK – now and for years to come. It also builds upon excellent progress to date, with almost half of all homes in England holding an Energy Performance Certificate (EPC) of C or above, up from 14% in 2010.  

Charlotte Lee, Chief Executive of the Heat Pump Association described the additional funding as “a very welcome boost for the heat pump sector”. Read more here.

British Heat Pump Manufacturer Kensa also welcomed the Government’s plans to invest £6 billion a year on heat and energy efficiency improvements, with Tamsin Lishman, CEO of The Kensa Group saying: “Long-term policy certainty is the most critical factor in delivering business investment, and this is particularly true of an emerging sector like ours.

Much-needed policy certainty

“Today’s confirmation of how the government will spend £6 billion/year supporting heat pumps and energy efficiency improvements provides businesses with a clear five-year time frame of support, giving certainty of continued market growth. 

“Critically, today’s announcement provides an enhanced spending envelope across building sectors, including private homes, social housing, the public sector and business. It is particularly promising to see a tripling of the Boiler Upgrade Scheme budget, providing support for almost 70,000 heat pump installations a year, up from 20,000 today.

This gives us the confidence to continue investing in and expanding our British manufacturing facilities and supply chains, providing jobs and economic growth for the British economy.

“It is vital that the government now builds on this announcement and continues to build the best possible green investment environment in the UK that will underpin the transition to net zero. This includes a rapid introduction of the Future Homes Standard, ensuring heat pumps and heat networks are the default choice for new homes, as well as action to address the UK’s artificially high electricity prices, ensuring that clean heat can become the lowest-cost as well as the lowest-carbon choice for homes.”

Encouragement to upgrade

Mike Thornton, Chief Executive at Energy Saving Trust said: “Improving the energy efficiency of our homes and accelerating the electrification of heat are both vital for reducing our reliance on imported fossil fuels, achieving the UK’s net zero targets and permanently lowering people’s energy bills.

“We welcome these new schemes and additional funding, which will help provide much needed incentives to encourage more people to upgrade their homes. We look forward to learning more about the detail including plans for roll out and engagement, as well as how we can help the UK government to ensure they are as successful as possible in supporting people to get the right measures into their homes.”

Zero-carbon ready new builds

The Future Homes and Buildings Standards, recently launched for consultation, will also ensure new homes and buildings are fit for the future and help meet net zero ambitions. Energy-saving changes will deliver significantly lower bill costs than the vast majority of existing homes, while also reducing carbon emissions by at least 75% for all new homes compared to 2013 standards.  

The £6 billion announced at Autumn Statement 2022 and allocated today will support tens of thousands of green jobs while helping homes, hospitals, schools and businesses to save money.      

These include the following schemes, which are subject to business case approval and value for money assessments: 

  • the Boiler Upgrade Scheme – allocated a further £1.5 billion
  • a new £400 million energy efficiency grant – launches in 2025
  • a new local authority retrofit scheme – allocated £500 million
  • the Social Housing Decarbonisation Fund – allocated £1.25 billion
  • the Green Heat Network Fund – allocated £485 million
  • the Heat Network Efficiency Scheme – allocated £45 million
  • the Industrial Energy Transformation Fund – allocated £225 million

Businesses, heavy industries and public sector organisations such as schools and hospitals will also benefit from the Public Sector Decarbonisation scheme and wider industrial energy efficiency and decarbonisation support, through to 2028.  

Backing heat network expansion

The government will also explore ways to expand heat networks to deliver more low-carbon heating to homes and businesses in England. The Heat Network Zoning Consultation will set out how heat networks will be delivered in areas where they are likely to be the cheapest low carbon option – to ensure families benefit from local, clean heat at fair prices.